228 - Finance Income Receivables

Current Assets

Receivables

Synopsis

Account 228

Debits

Credits

  1. The total amount of finance income earned on installment contracts sold by the retailer.

  2. The portion of finance income that becomes free of any contingencies.

  1. The amount received in settlement of finance income.

  2. The amount of deferred finance income which is being held by the finance institution to apply against future contingencies.

 

 

Remarks:

Finance Income Receivables includes such items as:

 

That portion due the dealer upon which immediate claim can be made.

That portion exceeding the "retention amount" of the outstanding finance liability.

That portion exceeding "special" or "hold reserves" as stipulated in the retail financing agreement; and any combination of these and/or other conditions of the retail financing agreement.

 

Each individual financing institution may vary in its dealers' participation and payment plan.  Income should be calculated and recorded on an individual contract basis at the time the sale is recorded in the vehicle sales journals.

 

The financing institution normally will furnish the dealer the amount of reserve and insurance commission earned on each contract.  The retailer should obtain a statement from each financing institution (preferably monthly) that indicates in detail each interim charge and credit since the last statement rendered.

 

Separate general ledger sub-accounts should be established for each financing institution (for example, 228A – ABC Credit Co., 228B – XYZ National Bank, etc.).

 

The balance in this account should be reconciled with the statement received, clearly defining the current and deferred amounts.  Any variances should be located, their source determined, and proper action promptly made to either rectify the debt or reclassify the unpaid or overpaid balance.  All variances should be reported to F&I Management.

Note: